7.2 The structure of costs in the short run  (Page 3/23)

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Average total cost, average variable cost, marginal cost

The breakdown of total costs into fixed and variable costs can provide a basis for other insights as well. The first five columns of [link] duplicate the previous table, but the last three columns show average total costs, average variable costs, and marginal costs. These new measures analyze costs on a per-unit (rather than a total) basis and are reflected in the curves shown in [link] .

Different types of costs
Labor Quantity Fixed Cost Variable Cost Total Cost Marginal Cost Average Total Cost Average Variable Cost
1 16 \$160 \$80 \$240 \$5.00 \$15.00 \$5.00
2 40 \$160 \$160 \$320 \$3.30 \$8.00 \$4.00
3 60 \$160 \$240 \$400 \$4.00 \$6.60 \$4.00
4 72 \$160 \$320 \$480 \$6.60 \$6.60 \$4.40
5 80 \$160 \$400 \$560 \$10.00 \$7.00 \$5.00
6 84 \$160 \$480 \$640 \$20.00 \$7.60 \$5.70

Average total cost (sometimes referred to simply as average cost) is total cost divided by the quantity of output. Since the total cost of producing 40 haircuts is \$320, the average total cost for producing each of 40 haircuts is \$320/40, or \$8 per haircut. Average cost curves are typically U-shaped, as [link] shows. Average total cost starts off relatively high, because at low levels of output total costs are dominated by the fixed cost; mathematically, the denominator is so small that average total cost is large. Average total cost then declines, as the fixed costs are spread over an increasing quantity of output. In the average cost calculation, the rise in the numerator of total costs is relatively small compared to the rise in the denominator of quantity produced. But as output expands still further, the average cost begins to rise. At the right side of the average cost curve, total costs begin rising more rapidly as diminishing returns kick in.

Average variable cost obtained when variable cost is divided by quantity of output. For example, the variable cost of producing 80 haircuts is \$400, so the average variable cost is \$400/80, or \$5 per haircut. Note that at any level of output, the average variable cost curve will always lie below the curve for average total cost, as shown in [link] . The reason is that average total cost includes average variable cost and average fixed cost. Thus, for Q = 80 haircuts, the average total cost is \$8 per haircut, while the average variable cost is \$5 per haircut. However, as output grows, fixed costs become relatively less important (since they do not rise with output), so average variable cost sneaks closer to average cost.

why do the people demand for money in the economy.
Because money helps in driving every activity in the economy.
Akoto
Also to meet the needs of all.
Akoto
Because it is the purchasing power
Lawrence
For speculative motive
Emmanuel
because it is portable
Jorge
Is only the purchasing power for exchanging of goods and services
is also better than trade and bater
Jorge
how to calculate national income
Mujittapha
how to calculate national income
Mujittapha
What do you means by patten law in economic?
Do you mean patent law or patten law?
Patent I'm sorry..
Tamba
Australian patent law is law governing the granting of a temporary monopoly on the use of an invention, in exchange for the publication and free use of the invention after a certain time. The primary piece of legislation is thePatents Act 1990 (Cth).
law is important thing
Anthony
yeah is important
Jorge
Demand for canned goods when it was reported that super typhoon hagupit will landfall in the Philippine area of responsibility on sunday night
opportunity cost ?
abdullah
opportunity cost is the alternative forgone after making a choice
Kotey
what is macroeconomic
its the study of the interractions of the various components of economics as a whole
Kotey
please suggest me topic for research, about following issues 1. labor migration & economic growth 2. terrorism and trade 3. religious pessimism and trad
state the law of diminishing returns.
the law diminishing returns states that as more and more units of variable factors of production(such as capital, labour) are combined with a fixed factor (such as land) after a certain point, the marginal product diminishes or declines
Vanessa
I would like to add one more point In the above statement. The addition of more variable factors of production will only leads to diminishing returns if the existing fixed capacity is fully utilised.
Ankit
what is diminishing marginal utility
with more units of consumption of a same commodity you will feel less satisfied with every next commodity. if you are thirsty you purchase a bottle of Coca-Cola and drink it, you will be satisfied at the same time again you drink another bottle of Cola you will be less satisfied in comparison.
Ankit
utility nothing it is just a measurement of your satisfaction.
Ankit
and diminishes as long as you consume same commodity continuously
Ankit
how to calculate the national income
Mujittapha
what is the problem of economic in the world?
jacob
i think the problem of economics is how to use scarce resources to satisfy unlimited wants
Kotey
what is taxation
levy paid by eligible individuals and companies to the government
Kingt
tax
Raji
A means by which governments finance their expenditure by imposing charges on citizens and corporate entities. Governments use taxation to encourage or discourage certain economic decisions.
Raji
a source of economic revenue in which working citizens pay levy which varies from one individual to the other.
Vanessa
monies paid by residents of a country to the government in which the residents benefit indirectly
Kotey
it's the government, looking for funding to create public goods and services so that everyone can be happy.
Sinethemba
why does the demand curve slop downward
Ronaxic
thanks
Ronaxic
why does the demand curve slop downward?
Ronaxic
the demand curve is nothing but a line which shows willingness to purchase a commodity or a thing.For example, if you want to purchase a Pepsi can you are willing to purchase 5 Pepsi cans if they are of \$3 each. but if they are of \$5 each you want to purchase only three of them.
Ankit
so at Higher prices you like to purchase less quantity that's why demand curve falls down words. but please note demand curve does not fall downwards always for inferior goods the rise up parts like a supply curve because at Higher prices you tend to purchase those goods more
Ankit
and at lower prices of inferior goods you tend to avoid them and relocate your Limited money to other goods.
Ankit
what is taxation?
In simple term. Taxation can be defined as compulsory payment levy on company or individual by the government. It can be direct or indirect.
salawu
what is capital
K.visor
its nice
Belaisan
it's nice
Abdulwali
capital , it is a investment of money or assets which is invested before starting up of the business
its nice
Belaisan
it won't let you sleep
Ankit
Please any Ghanaian schooling at KNUST?
combining factors of production is the role of
the situation in economic where by a more valuable good is sold at a low price while less valuable good is sold at a higher price .how can we describe this situation in economic
Fung
price discrimination
Fayaz
deman and supply
Samim
price discrimination
Citizen
enterlrenure
Fayaz
you can take example of water and daimond. you can ask someone to choose anyone from above 1. to a person in a Sahara desert and 2. a girl in London. you will get your answer
Ankit
it depends upon the buyer's preference what he wants why he wants and what is the necessity of that product at current time.
Ankit
causes of high elasticity of demand
causes of high elasticity of supply
Onyango
what is optimazation
lepekola
lepekola
A trade-off  is a situational decision that involves diminishing one quality, or property of a design in return for gains in other aspects.
what is indifference curve ?
abdullah
its represnted by the loops of points and gives same level of satisfaction
hisham
what is enterpreneurship
Kukoyi
Entrepreneurship is the talent, knowledge and willingness individual has to engage in an activity that can result in new kind of firm
what is the short run industry supply curves?
james
I think there' s a mistake. P = - 0.4 + 0.2Qs is the supply curve and not the demand curve. Am I correct?
Qs is quantity supplied
The
This is what I think
The
this eaquation is supply curve Qs=P-0.4 the relationship is positive when the price increase the Qs increase....
mukhtaar
since Qs is quantity supplied P= -0.4 + 0.2Qs =>P +0.4=0.2Qs =>P/0.2 + 0.4=Qs I made Qs the subject of the formula or equation. So your answer is correct
The
P = -0.4 + 0.2Qs is the same as P/0.2+0.4=Qs Price has a direct relationship with the quantity supplied i.e the higher the price the higher the quantity supplied. that is why it is +0.4(this is the quantity and it is postive) and P/O.2(is the price and it is positive).
The
For the demand equation let me give an example 0.2P-0.4=Qd. Here the P is postive(+0.2) and the quantity which is -O.4 is negative( because of the negative sign(-) there is an inverse relationship between price and quantity. For quantity demanded the higher the price the lower the quantuty.
The
It's how I understand it
The
0.2P-0.4=Qd. the equation is wrong because the price have direct ralationship Quantity demanded but the correct equation is-0.2P -0.4=Qd so the higher price the lower Quantity
mukhtaar
I think the relationship is inverse because of the negative sign(-)
The
ok You mean the price and quantity demanded should be negative(inverse relationship) for Qd and the price and quantity supplied should be postive(direct relationship) for Qs
The
thank you for the correction
The
yes because it got a positive gradient of +0.2
Michael
This is the mistake I found: "Since P is on the vertical axis, it is easiest if you solve each equation for P. The demand curve is then P = 8 – 0.5Qd and the demand curve is P = –0.4 + 0.2Qs. Note that the vertical intercepts are 8 and –0.4, and the slopes are –0.5 for demand and 0.2 for supply."
Valeria
dear price do not depend on quantity. rather quantity depends on price. so the equation should be Qty=0.2Px-0.4
Michael
please can someone generate supply equation for me
ok
Detto
Qs=f(P,Pr,G,E,Z,Pf,)
The
where p is price, Pr is price of related goods, G is goals of a firm E is supplier's future expectation of prices,Z is other related factors, Pf is cost of factors of production.
The
I think it's wrong
The
if Qd=90-p Qs=90+p
The
the coefficient of price must be positive since supply curve is positively slopping
Kotey
yes
The
it's true. thank you
The
welcome
Kotey
ok
The
OK, thank you
David
no one can do that, you must determine the the key factors for the commodity, like price, income, prices of alternative commodity, and other factors, if you want the main equation, you must have 4 values, 2 values for each quantity and price, for one commodity
Chief